Formations debate: Formations Direct opening statement

As the principal opposer, Formations Direct puts the case against the motion: "This house believes that accountants need to get more involved with company formations to add value to their client relationships."

Most company agents wrung their hands when Companies House offered web incorporation for £18. At that price, the government agency undercut the industry and turned company formations into a commodity.

At Formations Direct we saw the basic Companies House web offering as an opportunity to explain to accountants the advantages of outsourcing their formations activity to a reputable agent with fair pricing and a service that benefits them and their clients.

The buzz word these days is “collaboration” - and company formation is an ideal candidate. Everything is cheaper if you do it yourself and cut out the middleman. But what some call “disintermediation” we call folly when it comes to a professional service.

Many accountants who have used the Companies House web service will have encountered problems later, complicating their relationship with the client and wasting valuable professional time rectifying the matter. How does the accountant explain that to their client? And who pays for the time?

Accountants need to prove to their clients that they are more than beancounters and compliance officers. Using an agent who understands their needs can smooth that process, without threatening to hijack the relationship.

Formations Direct will help you build the all-important client relationship and can offer free expert advice and technical back-up based on years of experience working with Companies House. Additional facilities such as fast track bank accounts, domain registration and free online cloud e-registers are available to the accountants themselves, or their clients as they see fit.

The commoditisation of the formations market has drawn a sharper focus on price. Formations Direct concentrates on formation and the extras are optional value added tools. It’s a bit like paying for extra legroom and hold luggage on a budget airline, but not having to pay if you don’t want it, as you might on a flag carrier.

There’s a limit to how much attention accountants can give to a company formation and our advice is to get an expert in to do their part so you can use your time more efficiently.

We built our business catering for practitioners who understand that you get what you pay for, and that includes building a relationship so when things go pear-shaped you lift the phone and a friendly, knowledgeable voice is there at the other end to help you.

Bearing in mind that most formations are charged to the client, doesn’t it make sense to take advantage of all that an agent can offer when, excluding the statutory fee, it costs less than half a tank of petrol?

I see the need for you to try and differentiate yourself from Companies House formation service because you quite simply cannot compete on price alone.

Personally we use Jordans as an agent for our company formations and have been happy with the service that we have received, but the fees are significant when compared to Companies House formations. I appreciate we often ask for more complex articles and shares with different rights so where this happens I expect a greater cost. But for a standard formation, costs are considerably higher than Companies House formation service.

We offer considerable support for clients through the formation process because it is more than the formation itself they they need help with, and as much as we live in a digital age, sometimes speaking to someone face-to-face about what is a major decision in their lives is important to them. But our time costs money too.

We are in times of austerity and where new businesses are forming the chances of success are relatively low, So it is understandable if they choose to minimise their costs where possible for non-core business activities. I will not call that folly.

Thanks for your comment, Andrew, and for joining the debate. But I feel duty bound to put a word in on behalf of Formations Direct's statement.

As you can see from the top of the page, this is a sponsored debate involving both Formations Direct, and Jordans, who joined forces because they both felt the CA2006 changes and introduction of CH web filing had changed the market so profoundly that they wanted to raise awareness about the implications for the accountancy profession.

They opted to debate the motion as formulated, as this was a point where the company philosophies differed somewhat. This opposing statement from Formations Direct is mirrored by the opening statement from Jordans. There may be an element of "puff" involved, but both parties felt it was important to tell you where they are coming from.

Perhaps we at AccountingWEB should have explained the format a little better before the start. Now they have made their pitches, the floor is open to you to question the points raised from each side - and challenging their stances where you see fit, as you have done.

What will happen next is that we will draw together comments from the community and from Jordans to answer the points raised backing the motion, and then draft a counter reply around FD's commentary.

We hope the debate that follows will stimulate, entertain and educate AccountingWEB members in equal measures.

I used a company like them a few years ago when I needed a LTD, I got phoned up every few hours for days with them saying they just needed to check some details, then trying to sell me an add on services like expensive webhosting, accounting packages, overpriced bank account etc.

Therefore if I need to create another simple LTD, I will use the Companies House web incorporation just to remove the risk of the same type unwanted sales calls again.

(If the company is not simple, I will not be creating it myself but leaving it to lawyers or accountants to do.)

Looks like you made the mistake of one of those companies notorious for unprofessional practice in this field , which in reality is a front for a marketing outfit , and for whom the formation is a means to an end - ie to flog you something else

For professionals like us the company is the end in itself - the rest is icing on the cake

We have found that accountants are pleased when we use our relationship to offer them services that are relevant to them / their clients and promoted "softly " in a manner that can allow them to add value to their own client relationship

Until such time as the possibility of this happening again is removed I will just use company house directly and recommend all my friends do the same for simple companies. Trying to remember the “safe” agents to use when I only have a LTD every few years at most, is too hard, so sorry I will not be using any agents again.

Now if the banks offered it as a service alongside opening the company’s bank account….

(As this was not my first LTD, I already understood VAT, PAYE, corporation tax, etc. and could register for them on line, so did not need an accountant to help me with setting them up.)

Flying Scotsman wrote:

Looks like you made the mistake of one of those companies notorious for unprofessional practice in this field , which in reality is a front for a marketing outfit , and for whom the formation is a means to an end - ie to flog you something else

For professionals like us the company is the end in itself - the rest is icing on the cake

We have been using Companies House since it started; the service is efficient timely and cost effective. If you are an Accountant advising clients to operate through a company then you should have no problem using Companies House. No more information is required than you supply to any formation agent, using in the same format and also online.

In fact most of us use Companies House online to file annual returns and many other forms already.

It is clear that this has affected the overpriced services provided by traditional formation agents. who for straightforward companies just send you template Mem and Arts and Certificates that they try to charge for.

I’m sorry Formations Direct and Jordan’s, I'm sure you provide a good service for more complicated incorporations. But for straight forward incorporations Companies house can’t be beaten on value and service.

No gimmick no nonsense just easy to use.

As an Accountant in practice for 15 years I would rather take the profit from the advice to the client and save on the expensive use of incorporation agents. Welcome to the internet age things can only get better.